Even with some modest recovery in airline stocks, it may be too early to celebrate. The worst may not be over for the industry.

The International Air Transport Association says that global losses for airlines could top $6.1 billion this year. The Wall Street Journal quotes ATA Chief Executive and Managing Director Giovanni Bisignani as saying, "We are bracing for more situations of airlines collapsing" amid higher fuel prices and lower revenue.

The slowdown is apparently moving to Asia, a major destination for many large US and EU airlines.

United (NASDAQ: UAUA) is a good example of a US airline that many thought would be on the rebound. New fear of rising oil prices has spoiled that a bit. After falling from a 52-week high of $51.60, shares crashed to $2.80. They have recently made a minor recovery to $12.40. But, in the last two days, UAUA shares have been off sharply.

Oil is still just below $120. Even at that level, down from $143, airlines face huge increases in fuel prices over last year. A modest disruption in oil supply could send prices back up again.

The market sees US airline stocks as having potential for big returns. But, with the price of oil making a potential bottom, the carriers are still in too much trouble to have a real recovery. Buying shares in the companies still offers more risk than reward. The industry may still have operators that have valuations heading toward zero.

Douglas A. McIntyre is an editor at 247wallst.com.

"If there's one sector that stands to benefit handsomely from a further slide in oil or, at least, a moderation in crude's rally: the airlines," explains energy sector expert Elliott Gue.

In The Energy Strategist, he says, "Airlines may make a terrible long-term investment but can be an outstanding short-term trade." Here he looks at Delta Air Lines (NYSE: DAL) and, for the even more speculatively-inclined, US Airways (NYSE: LCC).

"Some investors will rightfully cringe from any mention of this sector; after all, the airlines have consistently lost money throughout their post-deregulation history.

"Most of the majors have declared bankruptcy on multiple occasions since that time. However, we've traded the airlines on a few occasions; we took some triple-digit percentage gains in the airlines back in 2005.

"The airlines' leverage to oil prices is well known. Expectations are so low, in fact, that several major air carriers actually managed to beat consensus expectations in the second quarter.

"And although sentiment is already at rock-bottom, there's a real basis for cautious optimism. First, if I'm right about oil, fuel costs won't rise appreciably in the third quarter. This huge headwind is dissipating.

Reading the paper everyday means seeing a headline that another airline merger is in the offing. The most recent wave of articles is on a United Airlines (NASDAQ: UAUA) merger with US Air (NYSE: LCC). It is yet another example of two carriers hoping that they can get together and save costs, without alienating customers in the process.

According to The Wall Street Journal, "The companies have identified more than $1.5 billion in potential cost savings and revenue enhancements from joining forces." The word "potential" is the key.

Airline employees who are in unions have a good chance of shutting down a merged airline if they think they will loss a ton of jobs. Pilots, flight attendants, and mechanics all have plenty of leverage. A combination of United and US Air would have almost $10 billion in revenue a quarter. It would not take a very long strike to eat through $1.5 billion of that.

The number of pending mergers is also almost certain to get some of them canceled by The Justice Department. Members of Congress who have employees on airline payrolls are also likely to take a position. Today, the US has at least five major carriers. If Delta (NYSE: DAL) and Northwest (NYSE: NWA) get married, that cuts consumer choice down by a lot.

Don't count on a United hook up with US Air. It is not likely to happen.

Douglas A. McIntyre is an editor at 247wallst.com and author of the Ten Stocks Under $10 letter.

As regular readers may have observed I am one to mull things over a while before offering up a slice of investment opinion pie. A few weeks ago Barron's (subscription required) ran a cover story titled "Open Skies" discussing the imminent deregulation of trans-Atlantic air routes.

In this context they reviewed the potential for airline mergers, (something I have written about before in Why no airline mergers? Finally the answer...) and they commented on who the winners and losers might be. The article highlights the fact that there has been a 30 year agreement in place, "the Bermuda airline agreement" that limited Heathrow-U.S. air traffic to just four airlines: two British and two U.S. Other foreign airlines were barred flying to the U.S. except from their own nation's airports.

Under terms of a new agreement cast last April U.S and European Union airlines departing 27 nations will be able to fly direct routes. Barron's does a fairly thorough analysis in my view of the potential success among various airlines and those that may come up short.

Though JetBlue Airways Corp. (NASDAQ: JBLU)'s Chief Executive Dave Barger seems to be bringing much needed focus to the plucky airline whose reputation was damaged by service disruptions in February, investors should continue to avoid the stock for now.

JetBlue currently trades at a forward price-to-earnings multiple of 21, higher than Southwest Airlines Corp. (NYSE: LUV) and American Airlines parent AMR Corp. (NYSE: AMR), so the shares are no bargain. Plus, Barger told the Wall Street Journal that he wasn't interested in selling the airline, which rules out any buyout premium.

"I wouldn't welcome any overture. In an acquisition, the product would get lost. The focus on costs would get lost," he told the paper. "Most importantly, this relationship we have with our crew members, 11,500 strong, [would be lost]. I just don't think that's a good solution for us."

Delta Airlines Inc. (OTC:DALRQ) Chief Executive Gerald Grinstein isn't expecting a pat on the back when the airline emerges from bankruptcy. In fact, he's not expecting much of anything.

Grinstein, who is planning to step down when Delta emerges from Chapter 11, declined all management equity awards, payments or severance that he otherwise would be entitled. When asked why he's forgoing the money, Grinstein told the Wall Street Journal (subscription required) that Delta "is a terrific company, and I wanted to see it succeed if I could help." He will continue collect a base salary of $338,000.

How refreshing to find a CEO that understand that it's not all about him. The Journal points out that Grinstein already has amassed a fortune from his business career.

Of course, Delta's employees deserve to be rewarded for their sacrifices.

When Delta emerges from bankruptcy in May about 39,000 workers will share $480 million in lump-sum payouts and equity, according to the Associated Press, adding that 1,200 management employees will hold a 2.5 percent stake in the company valued at $240 million. Pilots and flight dispatchers, who are represented by unions, will not receive lump sum and equity payouts but will participate in profit sharing and rewards program in exchange for wage concession.

Once Delta emerges from bankruptcy, investors should avoid the stock for a long time. The future remains as cloudy as ever for the airline industry.